What is a stablecoin

Key facts (as of 29 October 2026)

• Supply: about US$302bn of dollar-pegged stablecoins in circulation on 29 October 2026 (DefiLlama). Allium put supply at about US$305bn at the end of September, up just 0.4% since January (via CoinDesk).
• Payments: US$482bn of stablecoin payments in January–September 2026, up 45% on a year earlier, across more than 1bn payments, up 71% (Allium via CoinDesk).
• Concentration: USDT (about US$181bn) and USDC (about US$71bn) together account for more than 80% of dollar supply (DefiLlama, 29 October 2026).
• Euro tokens: all euro-pegged tokens together total roughly €0.8bn, led by EURC at about €485m (DefiLlama).
• Regulation: the US (GENIUS Act and the OCC rule effective 18 January 2027), the EU (MiCA), the UK (regime from 25 October 2027), Hong Kong, Singapore, Japan and the UAE now run dedicated regimes. Most require full reserves, redemption at par and no interest paid to holders.

A stablecoin is a digital token, issued on a public blockchain, that aims to keep a constant value against a reference asset. Almost all supply tracks the US dollar. A small share tracks the euro and other currencies. Unlike a bank transfer, a stablecoin moves from wallet to wallet on a shared ledger, at any hour, without a correspondent bank in the middle. Unlike most crypto-assets, it is not meant to rise or fall in price.

For a business, a stablecoin is mostly a settlement rail: a way to move dollar value between counterparties and then convert it back into bank money. That is the lens this wiki uses. We are less interested in stablecoins as investments and more interested in how they change the timing, cost and control of money movement for operators and payment firms.

The basic lifecycle

Every fiat-backed stablecoin follows the same loop. A customer sends bank money to the issuer, the issuer mints tokens, tokens circulate between wallets, and eventually someone redeems tokens for bank money and the issuer burns them.

flowchart LR
    A[Business sends USD by bank wire] --> B[Issuer receives cash into reserve accounts]
    B --> C[Issuer mints tokens to the business wallet]
    C --> D[Tokens move wallet to wallet on-chain]
    D --> E[Holder sends tokens back to issuer]
    E --> F[Issuer burns tokens]
    F --> G[Issuer pays USD to holder's bank account]
    B -.-> R[(Reserve: cash, T-bills, repo, MMF)]
    R -.-> G

Two points follow from this picture. First, only firms with a direct relationship with the issuer mint and redeem. Everyone else buys and sells on exchanges, OTC desks or through a payment provider (see On-ramps and off-ramps). Second, the token is only as good as the reserve and the redemption promise behind it (see Reserves, redemption and depeg risk).

How the peg is held

The distinction between forms comes from private.law's stablecoin overview, which separates fiat-backed tokens, tokenised deposits, on-chain money market funds and algorithmic designs. Regulated payment stablecoins are fiat-backed. The new US, EU and Asian regimes effectively exclude algorithmic designs from the payment category.

Warning"Stable" describes an objective, not a guarantee. In March 2023 USDC briefly fell below US$0.87 after Circle disclosed US$3.3bn of reserves held at Silicon Valley Bank (CNBC). It returned to par after US authorities protected SVB's depositors (private.law). See Reserves, redemption and depeg risk.

Why businesses use them

• Speed and hours. Transfers settle on-chain in seconds to minutes, including weekends and bank holidays. Visa's US USDC settlement launch in December 2025 was pitched around exactly this: seven-day settlement windows instead of the traditional five-business-day window (Visa).
• Cross-border reach. One dollar token moves the same way to any wallet in any country, subject to local law.
• Programmability. Issuance, redemption and transfers can be automated through APIs and smart contracts.
• Prefunding. Payout networks now accept stablecoins to top up accounts. Visa moved stablecoin prefunding for Visa Direct into commercial use on 15 October 2026, with Inyo Global as the first enabler, prefunding payouts in USDC (Visa). See Prefunding.
• Card network settlement. Visa reported its stablecoin settlement volume passed a US$20bn annualised run rate in September 2026, more than 15 times a year earlier (The Block). See Card networks and stablecoin settlement.

Reading the headline numbers carefully

Allium counted US$97.9tn of raw stablecoin transfers in the first nine months of 2026, but only about US$2.4tn (2.5%) was classified as end-user activity. The rest was exchanges, DeFi, bots and internal movements. Its US$482bn payments figure is drawn from that smaller pool. Stablecoin-linked card spending reached US$3.9bn through September, ten times the prior year, yet Allium estimated second-quarter card spend at just 0.03% of Visa's US$4tn payment volume (CoinDesk, reporting Allium).

NoteWhen a counterparty quotes "trillions" of stablecoin volume, ask which definition they use. In Allium's data, raw on-chain transfer value was about forty times end-user activity, and about 200 times the payments estimate.

Stablecoins versus other money

Why central banks are cautious

The Bank for International Settlements argued in its 2025 Annual Economic Report that stablecoins "fall short of requirements to be the mainstay of the monetary system" (BIS) against three tests: singleness (settling at par with other money), elasticity (expanding to meet large-value payment needs) and integrity (resistance to financial crime). That critique shapes how supervisors write rules and is worth knowing when talking to banks.

The Financial Action Task Force reinforced the integrity concern in its seventh targeted update on virtual assets (16 July 2026). It found that most identified on-chain illicit activity now involves stablecoins. It also flagged a financial services conglomerate with links to criminal networks developing its own stablecoin designed to resist freezing and seizure (FATF).

NoteFor high-risk merchants the integrity test matters most. Stablecoins do not remove AML, sanctions or licensing duties. They move the controls to the wallet, the issuer and the on/off-ramp. See AML and KYC and Wallet screening.

How the main regimes define a stablecoin

Detail for each sits in Stablecoin regulation by jurisdiction.

Timeline

Illustrative example: one settlement cycle

Illustrative example. Figures are invented to show the mechanics, not real data.

A payment provider owes a merchant US$250,000 on a Saturday. Its bank cannot wire until Monday. It instead sends 250,000 USDC from its treasury wallet to the merchant's verified wallet. The transfer is confirmed in under a minute and the network fee is a fraction of a cent. The merchant holds the USDC over the weekend and on Monday sends it to its off-ramp, which credits US$249,750 to the merchant's bank account after a 0.1% conversion fee. The merchant has had access to value two days earlier, but has taken on wallet security, screening and off-ramp counterparty risk in exchange.

Q/A

Is a stablecoin the same as a CBDC?

No. A central bank digital currency is a liability of a central bank. A stablecoin is a liability of a private issuer, backed by reserves the issuer holds.

Do stablecoins pay interest?

Regulated payment stablecoins generally may not. The GENIUS Act in the US and MiCA in the EU both bar issuers from paying interest to holders. Third-party "yield" products are a separate, riskier arrangement.

Can a stablecoin be frozen?

Yes. Major fiat-backed issuers can block addresses. Tether said on 23 April 2026 that its cooperation with law enforcement had led to more than US$4.4bn of assets being frozen, including over US$2.1bn connected to US authorities (Tether). FATF stresses that the ability to freeze and seize assets is key to disrupting criminal networks (FATF).

Is a stablecoin payment reversible?

Not on-chain. Once confirmed, the transfer is final in the ledger sense. Recovery depends on the recipient returning funds or the issuer freezing them. There is no chargeback. See Settlement finality.

Is a stablecoin legal tender?

No. In most jurisdictions it is a regulated private payment instrument. Some gambling regulators, such as Ontario's AGCO, explicitly refuse non-legal-tender deposits (see Ontario).

Does using stablecoins avoid card network rules?

No. Card-funded purchases of crypto and stablecoins carry their own Visa merchant category and indicator rules. And acquirers, banks and regulators still expect the same AML and sanctions controls whatever the rail.

Is a token settlement a taxable event?

It can be. private.law notes that settling in tokens may create a tax event and that CARF and DAC8 reporting will widen visibility. See Stablecoin accounting, reconciliation and tax.

Sources

• private.law, Stablecoins (updated 25 October 2026): https://wiki.private.law/en/stablecoins
• DefiLlama stablecoins data (read 29 October 2026): https://defillama.com/stablecoins
• CoinDesk, Allium Q3 2026 stablecoin payments data (18 October 2026): https://www.coindesk.com/business/2026/10/18/stablecoin-supply-stalls-but-payments-jump-45-as-visa-mastercard-and-stripe-connect-crypto-to-cash
• BIS Annual Economic Report 2025, Chapter III: https://www.bis.org/publ/arpdf/ar2025e3.htm
• Visa, USDC settlement in the United States (16 December 2025): https://corporate.visa.com/en/sites/visa-perspectives/newsroom/visa-launches-stablecoin-settlement-in-the-united-states.html
• The Block, Visa stablecoin settlement tops US$20bn run rate (8 September 2026): https://www.theblock.co/news/business/2026-09-08-visa-stablecoin-settlement-tops-20-billion-annualized-run-rate-up-more-than-15x-year-over-year-413749
• Visa, Visa Direct stablecoin prefunding (15 October 2026): https://investor.visa.com/news/news-details/2026/Visa-Direct-Launches-Stablecoin-Powered-Money-Movement-as-Pilots-Move-to-Production/default.aspx
• FATF, seventh targeted update on VAs and VASPs (16 July 2026): https://www.fatf-gafi.org/en/news/targeted-updated-va-vasps-2026.html
• ESMA, statement on the end of MiCA transitional periods (17 April 2026): https://www.esma.europa.eu/sites/default/files/2026-04/ESMA75-113276571-1679_Statement_on_the_end_of_transitional_periods_under_MiCA.pdf
• FCA, gateway to regulated crypto opens (30 September 2026): https://www.fca.org.uk/news/press-releases/fca-opens-gateway-regulated-crypto
• OCC Bulletin 2026-50: https://www.occ.gov/news-issuances/bulletins/2026/bulletin-2026-50.html
• CNBC, USDC breaks dollar peg after US$3.3bn SVB exposure (11 March 2023): https://www.cnbc.com/2023/03/11/stablecoin-usdc-breaks-dollar-peg-after-firm-reveals-it-has-3point3-billion-in-svb-exposure.html
• Tether, freeze of more than US$344m (23 April 2026): https://tether.io/news/tether-supports-freeze-of-more-than-344-million-in-usdt-in-coordination-with-ofac-and-u-s-law-enforcement/
• OCC, news release 2026-92 (21 October 2026): https://occ.gov/news-issuances/news-releases/2026/nr-occ-2026-92.html